I have been noticing on many online bitcoin districts that various users are unable to understand the concept of Segregated Witness. This post will clear up any doubts, uncertainties, and myths regarding SegWit.
So, what happens in SegWit?
SegWit is short for Segregated Witness and it’s a proposal presented by the developers of Bitcoin Core. Originally it was aimed to solve the transaction malleability, which is a well-known weak spot in the Bitcoin system. The idea behind SegWit is that the signatures in a transaction, also known as the “witness data” are skipped when calculating the transaction id.
Basically, SegWit will update the 1MB size block limit to 4-million unit block weight limit. This counts serialized
witness data and one unit and core block data as four units. This is an entirely new transaction format, meaning the block size is increased. SegWit counts each byte in a witness as 0.25 bytes towards the 1MB block limit, thus the maximum size of a block becomes just under 4MB.
It’s not that the data gets smaller, it’s just counted in a way that allows for the block limit to be increased.
The short/easy version
In simple words, signature related data is removed from bitcoin transactions, causing them to appear smaller in size. Also, making the block size smaller, further, allowing more transactions to take place.
Clearing up myths and rumors
Myth: SegWit as a soft fork is much more dangerous than a hard fork
A soft fork ensures that the backward and forward compatibility is under control. Also, when a soft fork is set up, old versions of Bitcoin software will be able to function without any faults. On the other hand, a hard fork requires every Bitcoin user to update to the new software to support the consensus rules. Any user that fails to upgrade to the new software might be under the risk of getting thrown off the Bitcoin network.
Myth: SegWit is more complicated than a super simple hard fork
Similar to a hard fork, SegWit proposes the same idea of increasing the block size limit. No doubt, it is pretty complex and introduces several changes, but it is a relatively simple conceptual change. Basically, SegWit ignores the signatures when calculating the transactions, but as a soft fork, some additional changes must be made to make SegWit transactions compatible with non-segwit nodes. These changes then have side effects which can be beneficial to Bitcoin. It also contains more functionality than a hard fork increasing the block size limit. The hard fork to increase the block size limit also appears simple, but additional changes need to be made to support the deployment and to solve the quadratic hashing issue with transactions.
Myth: Miners who don’t upgrade to segwit will be forcefully told to quit the bitcoin network
This is false since SegWit will be deployed using the BIP9 versionbits which uses a 95% threshold. A miner would not run into any trouble, as long as he follows certain rules. However, if he fails to follow these rules, he could end up with transactions including witnesses but he wouldn’t be having the witnesses nor the witness root hash in the Coinbase. This would be an invalid block that would be in the orphan pool.
What are the benefits of SegWit?
Besides the obvious benefit of having to increase the capacity, there are several other benefits that come with the introduction of SegWit. Some of those benefits are:
- Node performance is tested based on how weighting data
- Signature covers value
- Linear scaling of sighash operations
- MultiSig gets more security
- Script versioning
- Increased security to almost-full-nodes
Why hasn’t SegWit been activated yet?
If there is not enough support shown, it might result in a contentious fork. That means a part of the network switches to the new client while some remain to use the older version. This leads to two sets of cryptocurrencies with different rules, co-existing and competing for users and legitimacy.
In order to avoid such a situation, the developers of SegWit have programmed a specific rule in the software proclaiming that it will only activate once it reaches the 95% mark.
Currently, the support is hovering around 32-33%.
The U.S. SEC (Securities and Exchange Commission) has filed charges against the Centra Tech ICO (Initial Coin Offering), claiming that the legendary boxer, Floyd Mayweather promoted a token sale, which was allegedly a sham security offering.
According to the SEC complaint, the co-founders of Centra ICO are involved in the ICO fraud and made material misstatements as well as omissions that were intended to trick the investors whereas, the Centra ICO was also an “unregistered securities offering.”
SEC Ceases ICO
According to the Securities and Exchange Commission, Centra only pretended to have relationships with major financial institutions and lied about it. The major financial institutions which sent Centra several cease-and-desist letters are:
In addition to that, some of the executives showed in Centra’s advertising materials were also fake. The co-director of SEC’s Division of Enforcement, Stephanie Avakian stated:
“We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses.”
Furthermore, he added:
“As the complaint alleges, these and other claims were simply false.”
The Securities and Exchange Commission originally subpoenaed Centra in the month of February as part of its wide-investigation into ICOs.
Centra ICO Dependence
The Centra ICO is quite well-known because of its use of celebrity endorsements to advertise its product. Floyd Mayweather, who is known as a legendary boxing champion and has made paid-endorsements for numerous ICOs, had worked a lot on the promotion of the token sale on various social media platforms and got more than 5,600 like and 1,500 retweets. DJ Khaled was also hired by Centra for the promotion of the ICOs; however, no celebrity was named in the summons.
Steve Peikin also stated:
“As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme…. Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”
The SEC has also cautioned that some of these ICO endorsements by celebrities might be illegitimate especially if the parties don’t make any obligatory public disclosures. On the other hand, Mayweather’s tweet promoting the token sale, such as, doesn’t specify that it is a paid advertisement.
A Bitcoin wallet address is equivalent to a bank account for tangible cash. In bank accounts the money is deposited, withdrawn and transferred to other users. Same is the case with bitcoin wallets. These wallets are used to store/withdraw bitcoins and transfer them to other users. There are three major types of bitcoin wallets: web wallets, software wallets, and mobile wallets.
Also known as “eWallets” or “browser-based wallets”; web wallets are the easiest to protect and give you complete freedom to use/obtain bitcoins.
Some of the examples of web wallets are:
- Green Address
Software wallets are installed on your PC. The users have complete control over Software Wallets and are responsible for bitcoins’ protection and backups.
Some Examples of Software Wallets:
- Bitcoin Core
- Green Address
The users with Mobile Wallets have the freedom to store bitcoins on mobile devices. Mobile Wallets are simple and easy to use while transferring coins. All a user has to do is to scan the QR code using “tap to pay”.
How Do Wallets Work?
Each Bitcoin wallet comes with a private key. The key allows a user to spend the coins. It’s usually the owner only who knows about the key. However, if you are not careful enough with protecting the key, there is a huge chance that someone else will be able to figure it out and spend your coins.
What Are Some of The Tips to Keep My Bitcoin Wallet Secure?
As mentioned above, the key-protection should be your top priority while using online Bitcoin wallets. Otherwise, someone else could easily hack into your account to steal your coins. To make sure your wallet is well protected, follow the tips given below.
Weak passwords are easy to crack. There are several programs that run different patterns, names, and combinations to crack these passwords. To make sure your password is resilient to these attacks, do not use commonly used patterns or names. Instead, go with the strings of random letters, numbers, and symbols.
Multifactor Authentication is an additional security authentication to your password. This could be something like a favorite quote, secret question or a captcha.
Private Key Encryption:
Encrypt your private keys. A private key in plain text is easy to guess and easy to access. So, make sure your key is encrypted.
If Possible – Use Open Source Software:
Use open source software where possible as it gives you the freedom to review the source code and ensure it does what it says.Moreover, an open source software is quick to fix the security laps than closed source software. A good example of open source software is Linux which is used by most of the world’s financial system.
Lastly – Keep Backup of Everything:
Keep backup of your private keys and every single information in your wallet. Having a backup is of great significance. If your data is only stored in one hard-drive, and the drive dies, the information will be lost for good.
Roque Solis, president of the SoliSYSTEMS corp, never fictionalized that bitcoin mining equipment he credited in February would have already paid for itself and made money as well. SoliSYSTEMS Corp is a company which developed an EMV smart cards for electronic advantage transfer for the federal backing program.
Solis was powerless to ignore bitcoin by attending a number of conferences. So, he decided to do experiment new technology via mining. He wants to get the better handle on the technology, whether this technology has the ability to use in this company or not?
Then, Solis bought a Bitmain Antminer S9 for $2,400.
As a result, he mined 1.01BTC worth $2,584 in Bitcoin wallet, on this weekend. Solis said, “When I bought the miner, the price per bitcoin was around $1,200. I thought I’d break even in one year, but actually, it’s been about five months.”
This gain indicates that individual hobby mining is not profitable anymore. Distinct miners don’t have the capacity to compete with the companies in mining bitcoins. with the $600 below price, electricity and pool fees, a person needs 500 days to break even on miner investment.
Furthermore, the rise in awareness about the mining pool, the price is also getting higher. Solis’s experience shows that hobby miner can break even within few months.
According to the Solis, money’s amount is increased on daily basis with miner’s jump from $7 to $16 freshly.
According to the Sean Walsh, rising price of the bitcoins motivates the investing behavior of the miners. It is a key process which supports the whole network by safeguarding its ledger. Walsh said, “There are a lot of metrics that actually matter, like the number of people that own at least one bitcoin, but nobody cares about that. It’s just price. It’s the one score that wakes people up, and when The Wall Street Journal and other financial publications write about bitcoin.”
While Google trend shows the similar stories of bitcoin and bitcoin mining. Price factor of the bitcoin is not only the reason of increasing interest hobby mining. According to the Walsh experience, bitcoin transaction fees were stable from last few years, those fees have seen an uptick.
Walsh said, “This has to do with the block size debate, because the network is a bit congested, and people are having to pay more to get their transactions confirmed.”
In past, 100 bitcoins were per day transaction fees. Then this fee reaches to 350 bitcoins a day.
And, by 1,800 bitcoins shaped daily, 350 bitcoins are near to 20% of that. This is a blunt difference, a year ago when 60 bitcoins were paid in fees and 3600 produced on daily basis.
Walsh said. “that’s a huge boot.”
He added, “I don’t know that [increasing transaction fees] are affecting people’s interest in getting into mining. People may not realize why it’s more lucrative to mine bitcoins now, but when they run the numbers, the payback period looks better than it used to.”
He added, “It’s very important for people entering bitcoin mining that they really understand how to calculate their revenue and expenses. They need to make sure their cost basis and operating costs are very low.”
Like, if a junior miner overspends on accommodating servers, then there’s a modification, they are over-leverage.
Bitcoin’s value was down about 20% over the last weeks of June. Walsh said, “normal respiration of an asset class.” So far, others are not experienced in investing process and might be unaware of these fluctuations in bitcoin’s price.
According to the Solis, “it’s all about learning through experience”. The Antminer S9 is running in Solis’s company’s server room and in the presence of the groups of servers, he is unable to identify how much electricity is used by the miners. Solis says, “It is noisy, though,” and “Compared to the other servers, it’s very noisy.”
It is a machine with two particular boards with fans that rotate at 54,00 – 7000 per minute revolution. Solis is not the only one person who interesting in bitcoin hobby mining.